Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Differences in Taxes from Continuing Operations Computed at Statutory Rate

Following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statement of income:


	Years Ended December 31,
(dollars in thousands)	2017			2016			2015
Provision at statutory rate of 35%	$	59,032		$	70,149		$	57,013
Tax-exempt income:
Tax-exempt interest		(15,026	)		(14,356	)		(13,111	)
Section 291/265 interest disallowance		289			191			142
Company-owned life insurance income		(3,029	)		(2,968	)		(3,011	)

Tax-exempt income		(17,766	)		(17,133	)		(15,980	)

Reserve for unrecognized tax benefits		—			(1	)		(5	)
State income taxes		998			3,461			4,173
Tax credit investments—federal		(8,500	)		(321	)		(411	)
Estimated revaluation of deferred tax assets		39,300			—			—
ONB Insurance Group, Inc. nondeductible goodwill		—			8,328			—
Effect of Illinois branch sale		—			—			1,835
Other, net		(125	)		1,679			(448	)

Income tax expense	$	72,939		$	66,162		$	46,177

Effective tax rate		43.3	%		33.0	%		28.3	%

Provision for Income Taxes

The provision for income taxes consisted of the following components for the years ended December 31:


	Years Ended December 31,
(dollars in thousands)	2017		2016		2015
Income taxes currently payable:
Federal	$	—	$	23,735	$	17,385
State		—		2,242		769
Deferred income taxes related to:
Federal		31,915		35,955		24,664
Estimated revaluation of deferred tax assets		39,300		—		—
State		1,724		4,230		3,359

Deferred income tax expense		72,939		40,185		28,023

Income tax expense	$	72,939	$	66,162	$	46,177

Schedule of Significant Components of Net Deferred Tax Assets (Liabilities)

Significant components of net deferred tax assets (liabilities) were as follows at December 31:


(dollars in thousands)	2017			2016
Deferred Tax Assets
Allowance for loan losses, net of recapture	$	12,958		$	19,773
Benefit plan accruals		11,080			23,846
Alternative minimum tax credit		25,084			19,523
Unrealized losses on benefit plans		108			205
Net operating loss carryforwards		39,631			66,917
Federal tax credits		5,516			35
Other-than-temporary impairment		1,424			3,606
Acquired loans		29,669			40,522
Lease exit obligation		1,337			2,060
Unrealized losses on available-for-sale investment securities		14,011			23,365
Unrealized losses on held-to-maturity investment securities		3,630			7,118
Unrealized losses on hedges		923			4,116
Other real estate owned		369			3,310
Other, net		829			2,675

Total deferred tax assets		146,569			217,071

Deferred Tax Liabilities
Accretion on investment securities		(493	)		(700	)
Purchase accounting		(16,718	)		(17,552	)
Loan servicing rights		(6,058	)		(9,627	)
Premises and equipment		(10,052	)		(4,800	)
Prepaid expenses		(1,277	)		—
Tax credit investments		(168	)		—
Other, net		(946	)		(2,529	)

Total deferred tax liabilities		(35,712	)		(35,208	)

Net deferred tax assets	$	110,857		$	181,863

Summary of Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:


	Years Ended December 31,
(dollars in thousands)	2017			2016			2015
Balance at beginning of period	$	777		$	124		$	77
Additions based on tax positions related to the current year		162			118			51
Additions based on tax positions related to prior years		—			537			—
Reductions due to statute of limitations expiring		(173	)		(2	)		(4	)
Revaluation due to Tax Reform		108			—			—

Balance at end of period	$	874		$	777		$	124